Rising Interest Rates Will Suppress Housing Finance Volume: Report

A financial consulting firm forecasts rising interest rates will force overall housing finance volumes down and make banks and credit unions compete for a smaller pool of purchase money mortgages.

Analysts with SNL Financial reported in a data dispatch late last week that rising rates have strongly dampened demand for housing refinance loans but that demand for new housing finance loans has not yet grown enough to provide business for every existing mortgage firm.

Executives quoted in the report forecast a shakeout, particularly among mortgage firms which only came into the business in the past few years.

Executives also forecast that demand for purchase money loans will continue to rise as long as the economy continues to expand and unemployment continues to drop. Purchase money demand is much more correlated to economic growth than with interest rates, the firm quoted mortgage executives as saying.